WRB - W. R. Berkley Corporation Reports Fourth Quarter and Full Year 2023 Results

January, 24 2024 04:10 PM W.R. Berkley Corporation

Fourth Quarter Return on Equity of 23.6% and Operating Return on Equity of 23.2%;

Record Quarterly and Annual Pre-Tax Underwriting Income and Net Investment Income

W. R. Berkley Corporation (NYSE: WRB) today reported its fourth quarter and full year 2023 results.

Summary Financial Data (Amounts in thousands, except per share data)







Fourth Quarter

Twelve Months



2023



2022



2023



2022










Gross premiums written

$
3,232,710


$
2,914,877


$
12,972,006


$
11,909,052

Net premiums written


2,719,668



2,427,907



10,954,467



10,004,070










Net income to common stockholders


397,340



382,223



1,381,359



1,381,062

Net income per diluted share


1.47



1.37



5.05



4.94










Operating income (1)


391,753



323,329



1,344,567



1,223,934

Operating income per diluted share


1.45



1.16



4.92



4.38










Return on equity (2)


23.6
%


23.0
%


20.5
%


20.8
%
Operating return on equity (1) (2)


23.2
%


19.4
%


19.9
%


18.4
%

(1)

Operating income is a non-GAAP financial measure defined by the Company as net income excluding after-tax net investment gains and related expenses.

(2)

Return on equity and operating return on equity represent net income and operating income, respectively, expressed on an annualized basis as a percentage of beginning of year common stockholders’ equity.

Fourth quarter highlights included:

Return on equity of 23.6%.
Book value per share grew 11.6%, before dividends and share repurchases.
Record net investment income of $313.3 million driven by 52.9% increase in the core portfolio.
Net premiums written growth increased to 12.0%.
The current accident year combined ratio before catastrophe losses of 1.2 loss ratio points was 87.2%.
The reported combined ratio was 88.4%, including current accident year catastrophe losses of $32.0 million.
Record pre-tax underwriting income grew 8.2% to $315.9 million.
Average rate increases excluding workers' compensation were approximately 8.0%.
Total capital returned to shareholders was $263.8 million, consisting of $106.7 million of share repurchases, $128.8 million of special dividends and $28.3 million of regular dividends.

Full year highlights included:

Return on equity of 20.5%.
Book value per share grew 25.5%, before dividends and share repurchases.
Record annual pre-tax underwriting income of $1.1 billion.
Gross and net premiums written grew 8.9% and 9.5% to records of $13.0 billion and $11.0 billion, respectively.
Average rate increases excluding workers' compensation were approximately 8.1%.
Net investment income grew 35.1% to a record $1.1 billion.
Operating cash flow increased 14.0% to a record of $2.9 billion.
Total capital returned to shareholders was $1.0 billion, consisting of $537.2 million of share repurchases, $390.0 million of special dividends and $111.4 million of regular dividends.

The Company commented:

Our Company completed another record-setting year in 2023, achieving a 23.6% annualized return on beginning equity in the fourth quarter. Our quarter and full year results were characterized by growth in net premiums written, along with record underwriting performance and net investment income. Book value per share grew 11.6% during the fourth quarter, before the return of $264 million of capital to shareholders through special and ordinary dividends and share repurchases.

Growth in net premiums written accelerated to 12% in the fourth quarter, as we deployed capital in areas of the business that we expect to achieve or exceed our targeted risk-adjusted return on equity. In a market where lines of business increasingly move independently from each other, our decentralized structure provides us with a competitive advantage that allows us to better navigate risks and embrace opportunities.

Net investment income from our fixed-maturity portfolio increased more than 50% during the quarter and 60% for the year as our portfolio grew and we (re)invested at higher interest rates. The current rates at which we can reinvest remains higher than our annual book yield, and record operating cash flow positions us well for future investment income growth.

Our Company performed exceptionally well during 2023, and we anticipate 2024 will continue to be rewarding for our shareholders. We view the current property and casualty insurance and investment environments as favorable to our business model. We are confident that we will continue to deliver superior long-term risk-adjusted returns and increase value to shareholders in 2024 and beyond.

Webcast Conference Call

The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on January 24, 2024, at 5:00 p.m. eastern time. The conference call will be webcast live on the Company's website at https://ir.berkley.com/events-and-presentations/default.aspx . Please log on early to register. A replay of the webcast will be available on the Company's website approximately two hours after the end of the conference call. Additional financial information can be found on the Company's website at https://ir.berkley.com/investor-relations/financial-information/quarterly-results/default.aspx .

About W. R. Berkley Corporation

Founded in 1967, W. R. Berkley Corporation is an insurance holding company that is among the largest commercial lines writers in the United States and operates worldwide in two segments of the property casualty business: Insurance and Reinsurance & Monoline Excess.

Forward Looking Information

This is a “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein, including statements related to our outlook for the industry and for our performance for the year 2024 and beyond, are based upon the Company’s historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. They are subject to various risks and uncertainties, including but not limited to: the cyclical nature of the property casualty industry; the impact of significant competition, including new entrants to the industry; the long-tail and potentially volatile nature of the insurance and reinsurance business; product demand and pricing; claims development and the process of estimating reserves; investment risks, including those of our portfolio of fixed maturity securities and investments in equity securities, including investments in financial institutions, municipal bonds, mortgage-backed securities, loans receivable, investment funds, including real estate, merger arbitrage, energy related and private equity investments; the effects of emerging claim and coverage issues; the uncertain nature of damage theories and loss amounts, including claims for cyber security-related risks; natural and man-made catastrophic losses, including as a result of terrorist activities; the ongoing effects of the COVID-19 pandemic, or other epidemics and pandemics; the impact of climate change, which may alter the frequency and increase the severity of catastrophe events; general economic and market activities, including inflation, interest rates, and volatility in the credit and capital markets; the impact of the conditions in the financial markets and the global economy, and the potential effect of legislative, regulatory, accounting or other initiatives taken in response to such conditions, on our results and financial condition; foreign currency and political risks relating to our international operations; our ability to attract and retain key personnel and qualified employees; continued availability of capital and financing; the success of our new ventures or acquisitions and the availability of other opportunities; the availability of reinsurance; our retention under the Terrorism Risk Insurance Program Reauthorization Act of 2019; the ability or willingness of our reinsurers to pay reinsurance recoverables owed to us; other legislative and regulatory developments, including those related to business practices in the insurance industry; credit risk related to our policyholders, independent agents and brokers; changes in the ratings assigned to us or our insurance company subsidiaries by rating agencies; the availability of dividends from our insurance company subsidiaries; cyber security breaches of our information technology systems and the information technology systems of our vendors and other third parties, or related processes and systems; the effectiveness of our controls to ensure compliance with guidelines, policies and legal and regulatory standards; and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission. These risks and uncertainties could cause our actual results for the year 2024 and beyond to differ materially from those expressed in any forward-looking statement we make. Any projections of growth in our revenues would not necessarily result in commensurate levels of earnings. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

Consolidated Financial Summary (Amounts in thousands, except per share data)







Fourth Quarter

Twelve Months



2023



2022



2023



2022

Revenues:








Net premiums written

$
2,719,668


$
2,427,907


$
10,954,467


$
10,004,070

Change in unearned premiums


(5,054
)


85,317



(553,780
)


(442,641
)
Net premiums earned


2,714,614



2,513,224



10,400,687



9,561,429

Net investment income


313,341



231,283



1,052,835



779,185

Net investment gains:








Net realized and unrealized (losses) gains on investments


(2,862
)


77,647



47,540



217,311

Change in allowance for credit losses on investments


10,666



(2,549
)


(498
)


(14,914
)
Net investment gains


7,804



75,098



47,042



202,397

Revenues from non-insurance businesses


160,283



164,338



535,508



509,548

Insurance service fees


25,194



28,260



106,485



110,544

Other Income


146



1,599



381



3,396

Total Revenues


3,221,382



3,013,802



12,142,938



11,166,499

Expenses:








Loss and loss expenses


1,627,540



1,522,104



6,372,142



5,861,750

Other operating costs and expenses


906,011



822,248



3,363,936



2,961,505

Expenses from non-insurance businesses


154,754



159,127



524,998



493,189

Interest expense


31,879



31,902



127,459



130,374

Total expenses


2,720,184



2,535,381



10,388,535



9,446,818

Income before income tax


501,198



478,421



1,754,403



1,719,681

Income tax expense


(102,234
)


(96,437
)


(370,557
)


(334,727
)
Net Income before noncontrolling interests


398,964



381,984



1,383,846



1,384,954

Noncontrolling interest


(1,624
)


239



(2,487
)


(3,892
)
Net income to common stockholders

$
397,340


$
382,223


$
1,381,359


$
1,381,062










Net income per share:








Basic

$
1.48


$
1.38


$
5.10


$
4.99

Diluted

$
1.47


$
1.37


$
5.05


$
4.94










Average shares outstanding (1):








Basic


269,053



276,625



271,000



276,852

Diluted


271,015



278,888



273,298



279,461

(1)

Basic shares outstanding consist of the weighted average number of common shares outstanding during the period (including shares held in a grantor trust). Diluted shares outstanding consist of the weighted average number of basic and common equivalent shares outstanding during the period.

Business Segment Operating Results (Amounts in thousands, except ratios) (1)







Fourth Quarter

Twelve Months



2023



2022



2023



2022

Insurance:








Gross premiums written

$
2,902,010


$
2,607,497


$
11,561,138


$
10,583,785

Net premiums written


2,410,348



2,147,121



9,657,121



8,784,146

Net premiums earned


2,382,621



2,207,057



9,130,324



8,369,062

Pre-tax income


486,697



403,473



1,640,438



1,455,658

Loss ratio


60.8
%


61.4
%


62.3
%


61.3
%
Expense ratio


28.6
%


27.8
%


28.4
%


27.9
%
GAAP Combined ratio


89.4
%


89.2
%


90.7
%


89.2
%









Reinsurance & Monoline Excess:








Gross premiums written

$
330,700


$
307,380


$
1,410,868


$
1,325,267

Net premiums written


309,320



280,786



1,297,346



1,219,924

Net premiums earned


331,993



306,167



1,270,363



1,192,367

Pre-tax income


125,474



107,161



438,765



316,527

Loss ratio


53.8
%


54.2
%


53.8
%


61.3
%
Expense ratio


27.4
%


28.6
%


28.3
%


28.4
%
GAAP Combined ratio


81.2
%


82.8
%


82.1
%


89.7
%









Corporate and Eliminations:








Net investment gains

$
7,804


$
75,098


$
47,042


$
202,397

Interest expense


(31,879
)


(31,902
)


(127,459
)


(130,374
)
Other expenses


(86,898
)


(75,409
)


(244,383
)


(124,527
)
Pre-tax loss


(110,973
)


(32,213
)


(324,800
)


(52,504
)









Consolidated:








Gross premiums written

$
3,232,710


$
2,914,877


$
12,972,006


$
11,909,052

Net premiums written


2,719,668



2,427,907



10,954,467



10,004,070

Net premiums earned


2,714,614



2,513,224



10,400,687



9,561,429

Pre-tax income


501,198



478,421



1,754,403



1,719,681

Loss ratio


60.0
%


60.6
%


61.3
%


61.3
%
Expense ratio


28.4
%


27.8
%


28.4
%


28.0
%
GAAP Combined ratio


88.4
%


88.4
%


89.7
%


89.3
%

(1)

Loss ratio is losses and loss expenses incurred expressed as a percentage of premiums earned. Expense ratio is underwriting expenses expressed as a percentage of premiums earned. GAAP combined ratio is the sum of the loss ratio and the expense ratio.

Supplemental Information (Amounts in thousands)







Fourth Quarter

Twelve Months



2023



2022



2023



2022

Net premiums written:








Other liability

$
971,611


$
838,516


$
3,840,908


$
3,408,254

Short-tail lines (1)


527,074



431,528



2,099,684



1,749,926

Auto


351,934



308,746



1,397,585



1,257,659

Workers' compensation


290,203



281,070



1,228,058



1,221,804

Professional liability


269,526



287,261



1,090,886



1,146,503

Total Insurance


2,410,348



2,147,121



9,657,121



8,784,146

Casualty reinsurance


197,059



201,851



769,161



785,631

Property reinsurance


76,975



49,137



280,060



211,772

Monoline excess


35,286



29,798



248,125



222,521

Total Reinsurance & Monoline Excess


309,320



280,786



1,297,346



1,219,924

Total

$
2,719,668


$
2,427,907


$
10,954,467


$
10,004,070










Current accident year losses from catastrophes (including COVID-19 related losses):
Insurance

$
20,488


$
24,592


$
159,897


$
126,393

Reinsurance & Monoline Excess


11,529



6,253



35,065



85,317

Total

$
32,017


$
30,845


$
194,962


$
211,710










Net Investment income:








Core portfolio (2)

$
285,841


$
186,897


$
966,723


$
588,873

Investment funds


11,300



23,180



16,743



145,099

Arbitrage trading account


16,200



21,206



69,369



45,213

Total

$
313,341


$
231,283


$
1,052,835


$
779,185










Net realized and unrealized (losses) gains on investments:








Net realized (losses) gains on investments

$
(27,705
)

$
(10,422
)

$
(22,908
)

$
217,943

Change in unrealized gains (losses) on equity securities


24,843



88,069



70,448



(632
)
Total

$
(2,862
)

$
77,647


$
47,540


$
217,311










Other operating costs and expenses:








Policy acquisition and insurance operating expenses

$
771,170


$
699,227


$
2,954,686


$
2,673,903

Insurance service expenses


21,379



25,071



91,714



96,419

Net foreign currency losses (gains)


33,577



34,130



31,799



(50,930
)
Other costs and expenses


79,885



63,820



285,737



242,113

Total

$
906,011


$
822,248


$
3,363,936


$
2,961,505










Cash flow from operations

$
698,076


$
795,301


$
2,929,238


$
2,568,604










Reconciliation of net income to operating income:








Net income

$
397,340


$
382,223


$
1,381,359


$
1,381,062

Pre-tax investment gains, net of related expenses


(7,804
)


(75,098
)


(47,042
)


(199,087
)
Income tax expense


2,217



16,204



10,250



41,959

Operating income after-tax (3)

$
391,753


$
323,329


$
1,344,567


$
1,223,934

(1)

Short-tail lines include commercial multi-peril (non-liability), inland marine, accident and health, fidelity and surety, boiler and machinery, high net worth homeowners and other lines.
(2)

Core portfolio includes fixed maturity securities, equity securities, cash and cash equivalents, real estate and loans receivable.
(3)

Operating income is a non-GAAP financial measure defined by the Company as net income excluding after-tax net investment gains (losses). Net investment gains (losses) are computed net of related expenses, including performance-based compensatory costs associated with realized investment gains. Management believes this measurement provides a useful indicator of trends in the Company’s underlying operations.

Selected Balance Sheet Information (Amounts in thousands, except per share data)







December 31, 2023

December 31 2022





Net invested assets (1)

$
26,973,703

$
24,545,672
Total assets


37,202,015


33,861,099
Reserves for losses and loss expenses


18,739,652


17,011,223
Senior notes and other debt


1,827,951


1,828,823
Subordinated debentures


1,009,090


1,008,371
Common stockholders' equity (2)


7,455,431


6,748,332
Common stock outstanding (3)


256,545


264,546
Book value per share (4)


29.06


25.51
Tangible book value per share (4)


28.08


24.58

(1)

Net invested assets include investments, cash and cash equivalents, trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases, net of related liabilities.
(2)

As of December 31, 2023, reflected in common stockholders' equity are after-tax unrealized investment losses of $586 million and unrealized currency translation losses of $340 million. As of December 31, 2022, after-tax unrealized investment losses were $893 million and unrealized currency translation losses were $372 million.
(3)

During the twelve months ended December 31, 2023, the Company repurchased 8,707,676 shares of its common stock for $537.2 million. During the three months ended December 31, 2023, the Company repurchased 1,560,701 shares of its common stock for $106.7 million. The number of shares of common stock outstanding excludes shares held in a grantor trust.
(4)

Book value per share is total common stockholders’ equity divided by the number of common shares outstanding. Tangible book value per share is total common stockholders’ equity excluding the after-tax value of goodwill and other intangible assets divided by the number of common shares outstanding.

Investment Portfolio December 31, 2023 (Amounts in thousands, except percentages)







Carrying Value

Percent of Total
Fixed maturity securities:




United States government and government agencies

$
1,716,731

6.4
%
State and municipal:




Special revenue


1,606,195

6.0
%
State general obligation


432,078

1.6
%
Local general obligation


387,336

1.4
%
Corporate backed


154,839

0.6
%
Pre-refunded


104,478

0.4
%
Total state and municipal


2,684,926

10.0
%
Mortgage-backed securities:




Agency


1,429,956

5.3
%
Commercial


644,313

2.4
%
Residential - Prime


192,193

0.7
%
Residential - Alt A


2,861

0.0
%
Total mortgage-backed securities


2,269,323

8.4
%
Asset-backed securities


4,187,040

15.5
%
Corporate:




Industrial


3,559,555

13.2
%
Financial


2,779,234

10.3
%
Utilities


684,924

2.5
%
Other


630,346

2.3
%
Total corporate


7,654,059

28.3
%
Foreign government


1,666,229

6.2
%
Total fixed maturity securities (1)


20,178,308

74.8
%
Equity securities available for sale:




Common stocks


838,054

3.1
%
Preferred stocks


252,293

0.9
%
Total equity securities available for sale


1,090,347

4.0
%
Cash and cash equivalents (2)


1,694,199

6.3
%
Investment funds


1,621,655

6.0
%
Real estate


1,249,874

4.6
%
Arbitrage trading account


938,049

3.5
%
Loans receivable


201,271

0.8
%
Net invested assets

$
26,973,703

100.0
%

(1)

Total fixed maturity securities had an average rating of AA- and an average duration of 2.4 years, including cash and cash equivalents.

(2)

Cash and cash equivalents includes trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchase.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240124926833/en/

Karen A. Horvath
Vice President - External
Financial Communications
(203) 629-3000

Company Name:	W.R. Berkley Corporation
Stock Symbol:	WRB
Market:	NYSE
Website:	wrberkley.com

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